Institutions are increasingly adopting Bitcoin, custodying it as an inflation-resistant store of value. However, despite BTC’s resistance to monetary inflation, institutional BTC holdings are continually diluted—not by central bank money printing, but by custody fees. Holding BTC at scale comes with operational complexities, and institutional-grade custody solutions charge ongoing fees that steadily erode Bitcoin-denominated balances.

To offset these custody costs, institutions have historically had to take on new risks in order to generate yield. Lending BTC exposes them to counterparty risk, where borrowers may default or platforms may collapse. Trading strategies require active management and market exposure, forcing institutions to engage in risk-heavy maneuvers just to maintain the value of their holdings. The dilemma is clear: either absorb the cost of custody and watch BTC holdings shrink over time, or take on additional risks to generate enough yield to offset the fees. For many institutions, neither option is ideal.

Bitcoin staking changes this dynamic by offering a fundamentally safer way for institutions to generate yield. Unlike lending or trading strategies, which introduce counterparty or market risks, staking provides a native yield opportunity without exposing institutions to additional risk. Instead of relying on external borrowers or market movements, BTC staking simply allows holders to earn a return on their Bitcoin while maintaining its underlying security. This makes it a far more attractive option for institutions looking to offset custody fees without jeopardizing their holdings.

For institutions that already generate yield on their BTC, staking is the preferred choice because it offers returns in the safest possible manner. However, traditional BTC staking has one major drawback—it requires locking up Bitcoin, making it inaccessible for collateralized trades or other institutional use cases. Institutions that rely on BTC as collateral to borrow stablecoins, execute trading strategies, or manage liquidity cannot afford to give up access to their holdings. While staking eliminates the risks associated with other yield-generation methods, the loss of liquidity makes it impractical for many institutional participants who need the flexibility to deploy their BTC.

Reflexivity Research produces top-tier, institutional-grade research, and this latest report provides deep insights into the current state of institutional Bitcoin yields. It breaks down how institutions are navigating the challenges of BTC custody, the trade-offs they’ve historically faced, and the solutions that are now emerging to reshape the landscape. As Bitcoin yield generation becomes a greater priority and liquid staking gains momentum, it’s clear that Core will be a cornerstone of the next wave of institutional adoption.